(Guest Post by Collin Hitt)
Chicago Public Schools announced layoffs yesterday of more than 2,000 employees. From the Chicago Tribune:
About half of the 1,036 teachers being let go are tenured. The latest layoffs, which also include 1,077 school staff members, are in addition to 855 employees — including 420 teachers — who were laid off last month as a result of the district’s decision to close 49 elementary schools and a high school program.
Yesterday was a rough day in Chicago. City government is heading into a financial tailspin. The city’s bond rating received a triple-downgrade from Moody’s. The district’s finances aren’t any better. It will be impossible for the district or the city to borrow enough money to patch their budgets. And with every other taxing entity in Chicago running in the red, the ability of CPS to hike taxes will be limited.
The district is blaming the layoffs on its ongoing pension funding crisis. As the Illinois Policy Institute was pointing out two years ago, the district’s retirement costs were set to quadruple to more than $800 million between 2012 and 2014..
Benefit reforms could have softened this blow. Look at Milwaukee schools, the subject of a recent Fordham Foundation report by my colleague Bob Costrell and Larry Maloney. The district was able to dramatically lower its retirement costs thanks to reforms spearheaded by Scott Walker, who is despised in Illinois Democratic circles. From the Wisconsin Reporter:
Instead of retiree costs rising by $1,652 per pupil, to a total of $3,512 per student, Costrell and Maloney now project an increase of $64 per pupil, to a total of $1,924 per student.”
That works out to about $110 million annually in savings, or about 10 percent of MPS’s current budget.
And the study projects Act 10, loathed by public-sector unions, will save more than 1,000 jobs, or about 25 percent of MPS teaching positions, by the year 2020.
The Chicago Teachers Union has successfully fought to leave benefits unchanged. The most recent collective bargaining agreement in Chicago, settled after a weeklong strike, gave generous raises and made no major changes to benefit costs. It was a financial suicide pact. Had the district won flexibility to reduce pay or benefits in the face of cash shortfalls, many of yesterday’s laid-off teachers would still have their jobs.
The layoffs in Chicago are going to be painful for a lot of good people. But, as Jay pointed out last fall after the CTU strike, this day was predictable. And this mass round of layoffs may usher in Chicago’s iteration of “real” merit pay:
When Chicago closes a traditional public school for low enrollment the teachers are laid off. The new contract appears to place some limits on this, but the practice has generally been preserved. In addition, unlike in some other big cities, principals in Chicago are free to hire teachers as they see fit and are not forced to take teachers laid off from school closures. The new contract does require that half of all newly hired teachers come from those laid off and guarantees re-hiring only for the highest rated teachers, but according to the city’s summary of the agreement: “Principals maintain full authority to hire whichever teacher they deem best.”
The net effect of growing charter schools, closing under-enrolled traditional public schools, and only hiring back the best and most desired teachers from those schools is a true merit pay system. Bad teachers are let go. Good teachers not only get their job back, but they also get an extremely generous pay raise over the next four years for staying and being good. That’s real merit pay.
Jay P. Greene's Blog 
If the unions don’t like what’s happening in Chicago, they should tell us why they prefer what’s happening in Detroit so strongly.
So it seems like things worked in Chicago. Pay remains high. Good teachers keep good pay and bad teachers find other jobs in other businesses – or don’t find jobs – or learn that the private sector is both better AND worse than a public school teaching job. Hopefully teachers unions will learn that a 2 tier system of pensions is the only fair way to proceed. People who were promised something for 20-30 years have the promisses kept. People who have time to plan a different life will plan a different life. In all likelihood, these younger people will not trade current pay for future pensions as my generation did. Expect more teacher strikes or a shortage of teachers as young people move out of the profession at a faster rate than in my generation. OR because these foolish young people choose Obama and his policy of sacrificing economic growth for global warming and health care – these young teachers may take less total compensation because it its better than their peers’. In my generation compensation kept falling behind my peers – and teachers took job security and a good pension in lieu of better pay (Except in California where they drank the state’s kool-aid, believing that CALSTRS alone was better than a lesser CALSTRS + Social Security).
One more thing. I never see Charter School advocates discuss the inevitable problem of their good teachers getting older and wanting, needing, expecting, better pay as they get even better with age. Currently Chaters are living LaVida Loco on the advantage of having young lesser paid workers. Will they be thrown to the junk heap when they are older and better?